Much of what was said by Michael Gove, secretary of state for levelling up, in his recent, widely trailed cladding speech sounded as though a new knight in shining armour had entered the fray, supercharging the previous approach and putting the so-called ‘wrong-uns’ on notice: “We are coming for you.”
More specifically they have been given a deadline in March to come up with a fully funded plan to cough up an extra £4bn – in addition to the £2bn set to be raised by the residential property developers tax and the money from the levy on new tall buildings.
They were further admonished that “those who profit must pay and be held to account”. The key theme was polluter pays, meaning “the owners, the freeholders the responsible people”, although the solution seems to be expected from the major developers only.
There is a concerning lack of understanding that freeholders are often far removed from the original developersThose that had nothing to do with the pollution can accordingly be forgiven for thinking they should not pay and that their constitutions, shareholders or balance sheets mean they should resist doing do.
There is also a concerning lack of understanding that freeholders are often far removed from the original developers, with a minor financial interest in the building, based on recovery of all costs from the leaseholders. Many have no links to the construction of the buildings they 'own', and of course some freeholds are also owned by the leaseholders themselves. Regardless, a new task force is already said to be training its sights on the wrongdoers.
Alongside the big money announcement were some further embellishments. The loan system for the remediation of buildings below 18m was summarily dismissed, although what should happen to the work or the bills for the work is not clear. Claims are to be allowed for 30 years rather than six, but again if the original wrongdoer no longer exists it is hard to see how this will help leaseholders.
The ‘wrongly interpreted’ guidance note will be withdrawn, but with no alternative for the industry to rely on, it remains to be seen how buyers, lenders and surveyors will adapt and whether the EWS1 form, which provides assurance that the building meets government standards, will simply disappear.
A new promise of £27m for fire alarms rounded out the additional promises. As a piece of parliamentary theatre it was impressive enough, but it is difficult to conclude that the plan is anything other than the latest, hope-filled stab at an intractable and complex problem.
Getting hopes up?
More painfully, many leaseholders listening to the initial speech will have had their hopes raised by the entirely uncontroversial statements that they were the innocent parties in all of this, and that they should not have to pay. Many will however remember that, a year or so ago, a bill to protect leaseholders from being saddled with fire safety costs was voted down. As the recent debate wore on it also became clear that monies already spent are unlikely to be refunded, and that the scope of what would be paid for remained linked to the previous narrow definition of cladding.
Lives have of course already been miserably affected over the four years since building safety issues began to really affect leaseholders in large numbers, and there is something cruel about raising the hopes of people in desperate situations that cannot be fixed any time soon.
Within the industry, disputes over service charges for remediation works are repeatedly raising their ugly heads and look set to tie up leaseholders, freeholders and many different types of professionals in complex negotiations for which the rules sadly appear not to have been written. It would have been fairer to state clearly that the Treasury’s coffers could not be opened any wider, that the legislation will take many months if not years, and that even with the newfound sense of purpose and vigour, unravelling responsibility and unlocking financial solutions remains a long way off.
Regulation
The massive regulatory failure of recent decades seems to have been removed from the conversation, which may be superficially politically attractive, but will ultimately lead to unworkable solutions. The model on which the industry has operated for some time now is deeply compartmentalised, with multiple, legally distinct parties that all require risk to be packaged, offset and watered down. It may well be that post-Grenfell we require a single entity to remain liable and to retain sufficient financial substance or backing for that to mean something. Many innocent buyers will have thought we had that, but they have been sadly disabused.
The best answer has always been to narrow down the areas of focus to truly dangerous homes, and then to remediate them using public money that is subsequently clawed back from those found responsible after due legal process. The reality of the Building Safety Fund has been understandably complex, but efforts should be redoubled and the sensible provisions for clawback from responsible parties should be relied upon to do their job. A better understanding of risk is an absolute requirement, and bringing lenders, insurers and surveyors together to work on solutions is far more critical to freeing up the market – and people's lives – than playing the blame game.
If the system is to be made fit for purpose going forwards, it is essential that designs that have been approved, products that have been certified as safe, and work that has been signed off can be fully relied upon. That is clearly the responsibility of the government, but it should also be acknowledged that there may be additional cost implications.
The government’s enthusiasm for demonising developers in particular should be tempered by the fact that the Grenfell inquiry is more than likely to highlight significant failings across the board, particularly on the regulatory front but also in relation to linked matters such as electrical safety. Given the limitations of a survey for an individual flat in terms of covering everything that will be payable by the buyer’s service charge, surely it is also now time for a single report for each building or block to be mandated so that it can be relied on by multiple buyers and regularly updated.
As Gove acknowledged, we still desperately need more homes that are "safe and decent and sustainable". There is no appetite for government to deliver those homes itself and it is therefore vitally important that they work hard to provide a robust and reliable regulatory and planning framework that rewards good, safe and sustainable design and delivery. Homeowners deserve better than the tragedy of Grenfell, and much hard work is still needed to go with the fine words.
Jeremy Raj is national head of residential property at Irwin Mitchell
